Tag Archives: money

Budgets, spending, cuts, and shutdowns are common words that we read and hear in the news as of late. In these lean economic times, those of us here in the real world have been maintaining a budget for most of our lives. Most of us have faced the hard decisions at least once about which bill will get paid on time and which one will have to wait until our next check.

The thing that has puzzled me since I was young teen and started studying how the government works (or doesn’t work), is how WE THE PEOPLE must live by one set of rules and the government and politicians live and operate by a totally different set of rules. We make cuts to our family budgets while the federal (and state) government continues to spend money even after the account is overdrawn. We sacrifice where we take our family on vacation, if we can take a vacation at all, and the politicians will spend tax money on such things as the study of the flatulence of cows and other livestock.

The Obama family cost us taxpayers over $14 million on their Christmas vacation alone. While most of the nation cut the amount presents they purchased for family members, the Obamas lived it up in beach front houses that WE paid the rent on. The Secret Service had to have the adjacent house of course to protect the first family, again, costing US,THE TAXPAYER the cost involved for them to perform their duty. In this $14 million was also room and board for 24 staff members to stay at the Moana Hotel plus an rental office, rental cars, fuel and other things that are required for the secret service to do their job.

A portrait of Marie Antoinette, painted around 1791, by Alexandre Kucharsky.

My colleague recently wrote about Michelle Obama’s trip to Africa. The estimated cost of the trip was $700,000 to $800,000, of taxpayer money. U.S. Embassy Spokeswoman Elizabeth Trudeau made it clear that the trip was partially a personal pilgrimage for the first lady. If any of us want to take a personal pilgrimage, finding our roots, or any other reason for such a getaway, we have to pay for it out of our own pocket. We do not get the luxury of raiding the coffers of the taxpayers under the guise of “official business”. What about Michelle’s trip to Spain with her daughter and 40 of her closest friends? The vacation to Martha’s Vineyard that cost taxpayers between $35,000 and $50,000? I personally like the way Andrea Tantaros wrote in The New York Daily News deeming Michelle Obama as the “modern-day Marie Antoinette“. It most certainly seems a fitting title considering the expensive habits of Michelle while the taxpayers struggle to make ends meet.

When the money isn’t coming out of your pocket it is easy to go on vacation. For the rest of us we will just have to decide. Vacation? Or, pay the mortgage.

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For those of you that own firearms, train hard and well and teach those that do not know how. Be good stewards of the right to bear arms, for we are the last line of defense against tyranny.

A 62-year-old Arizona man, Frank Ballesteros, “needs one little word” to help him out of his economic situation.

The word is not “hope” or “God” or “patience”. Perhaps the word is “j-o-b”? Well, think again. What Mr. Ballesteros says he needs is the word “three”. Frank would like for Arizona’s legislature to make a “small word change, from ‘two’ to ‘three’ in its statutes” to extend jobless benefits.

Mr. Ballesteros is walking door-to-door handing out resumes, yet he doesn’t say he needs a job. He just needs the statute to be changed so he can continue receiving his check.

A New York Times article states:

That last extension of unemployment benefits — typically received in weeks 80 through 99 of unemployment — is paid for entirely with federal money and does not affect state budgets. But because of ideological opposition and other legislative priorities, Arizona and a handful of other states, like Wisconsin and Alaska, have not made the one-word change necessary to keep the program going.

While Mr. Ballesteros may truly want a job, he may be one of very few people over the age of 60 who truly want to work at this stage in their life. Though he is out looking for a job, he does not make it clear that employment is what he needs – just that he needs for his unemployment checks to be extended.

Mr. Ballesteros fails to understand that nothing is free. Federal money- again- tax payers money- that is given to the states come with many strings attached. The fact that Arizona and the other states that refuse to make the “one-word change”, rather than caving in to the federal government is something to be admired.

Times are hard and there are a lot of people out of work. However, no person can honestly expect to have their unemployment extended yet again, especially when this nation is in the financial situation we are in.

I would like to read an article highlighting someone who has lost their job and made the best of it despite the bad economy. Surely there are people out there that were more prepared for a set-back to happen in their lives. When did we stop looking for the positive stories during the hard times? Are we so focused on the negative side of things that we refuse to look for and see the positive stories out there among the bad news?

This is the land of opportunity! It may not be the best paying job, it may not be the most prestigious job, and it most definitely may not be a job we would “like” to do. The problem is we, as a nation, have become so spoiled that we have either became too afraid or “too good” to do whatever it takes to make ends meet. We as a nation have become too independent on the Federal Government to provide for our needs- and now we feel “entitled” to whatever we want or feel we need.

“Whatever does not kill you makes you stronger.”

The vast majority of those who have been out of work for two years and have been receiving unemployment the entire time, thanks to the extensions, have simply sat back waiting for their next check. There are numerous reports of the unemployed turning down job offers so they can continue to receive unemployment checks. I wonder how many jobs has Mr. Ballesteros turned down because they didn’t “pay enough”.

Seemingly everywhere there are “Help Wanted” signs posted. From the corner grocery store to Dollar Tree, Dollar General, gas stations or restaurants, the signs have been posted for some time. If people were truly starving these jobs would be filled within hours of the sign being posted! We, as a nation have become so spoiled that we refuse to lower our standards on what we will and will not do.

If this were you that was unemployed at 62-years-old, would you ever allow yourself to remain unemployed for two years without taking whatever actions that are necessary to prepare for your situation? Would you make the difficult decisions such as downsizing your living quarters, moving in with friends or family or moving to another city or state?

The continuously unemployed do not lack jobs or money as much as they lack initiative, creativity and motivation to do whatever necessary to provide for themselves. Some of these people have sat back and accepted free unemployment checks for two years. They have made no plans to do whatever necessary to break the endless cycle they are in; instead, they are counting on the government to provide for them.

What will happen after 3 years of unemployment? Will Mr. Ballesteros’ situation magically be better, or will he simply be prolonging the inevitable fact that he cannot rely on the federal government to take care of him?

Unemployment checks are the poison that creates unemployment. The tax burden reduces the workforce which increases the tax burden until the system goes bust. THEN where will the newly unemployed who have been carrying the burden for everyone else go for a check?

Mr. Ballesteros, did you apply at McDonald’s when they hired 50,000 people?

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A special thank you to my colleague, Wayne, for some pointers for this article.

COLORADO SPRINGS, Colo., April 5, 2011 /PRNewswire/ — A new study from Junior Achievement andThe Allstate Foundation shows that 81 percent of teens say the recession has motivated them to learn more about managing their money and parents are their number-one resource for financial planning, yet less than half of teens say they have discussed money management with their family.

“Much like the ‘birds and bees’ talk from previous eras, money management has become the topic that today’s teenagers desperately need to learn from their parents,” said Jack E. Kosakowski, president and chief executive officer of Junior Achievement USA™. “But, and also like the birds and bees, many of today’s parents may not feel up to the task of educating their children about money matters, so they hope their children learn what they need to know in other ways.”

Tougher economic conditions have pushed teens to make money management a higher priority than in the past. Nearly 90 percent of teens plan to save more and 78 percent will spend less in the wake of the recessive economy.

To help kick-start a family conversation about money management at home, Junior Achievement, in collaboration with The Allstate Foundation, recently launched a series of free online lessons that empower youth to own their future economic success. The online lessons, the first resource of its kind from Junior Achievement, engage kids in an online space to learn about money in a fun and entertaining way.

“It’s more important than ever to invest in America’s youth to ensure their personal financial well-being and the continued growth of the economy,” said Matt Winter, president and CEO, Allstate Financial. “The Allstate Foundation and Junior Achievement are reinventing the way our children learn how to weather a tough economy and manage their financial futures in the real world.”

Junior Achievement’s online and in-classroom curricula teach age-appropriate concepts around spending, sharing and saving money. Elementary students learn about taking responsibility for financial decisions, how to make those choices based on prioritizing needs and wants, and then develop a plan for spending and saving. Middle school students learn to take income into account to create a personal spending and savings plan that uses different payment methods, including credit. High school students build on these lessons and apply them to real life scenarios such as buying a car and paying for college.

Other key findings from the poll include:

81 percent of teens surveyed say K-12 is the best time to learn money management.

Nearly 50 percent of teens are unsure of how to use a credit card effectively, yet 24 percent think high school or younger is when they should get their first credit card.

It’s hard to overstate the concern that American families have regarding the economy, but one thing we all need to pay more attention to is the value of the U.S dollar. Imagine, if you will, what would happen to your families’ savings should the U.S. dollar truly crash, especially when unemployment and underemployment are both high. Families, if they can, are already desperately trying to save as much money as possible. But what if the money families have so carefully saved for a rainy day could no longer buy even the basic necessities? This is the reason behind bills such as the Utah Sound Money Act.

Although to some it may seem extreme, we do need to prepare for the possibility that there may come a day that the dollar’s buying power will be drastically reduced. And the truth is, Utah is not alone in their concern. According to State Representative Galvez, House sponsor of the bill, 11 states have either passed currency related legislation or have legislation in process. Other states passing or considering currency related legislation include: Montana, Missouri, Colorado, Idaho, Indiana, Missouri, Montana, New Hampshire, South Carolina, Tennessee, Vermont, Virginia, Washington…

The truth is that with the decline in the value of the dollar and the rise of U.S. debt,more and more countries are becoming concerned about whether the U.S. dollar is a good investment. And unfortunately, Washington’s printing of more dollars will not only not solve the problem , it may quicken the devaluing of the dollar.

For those who do not believe that the U.S. dollar may be in trouble, please consider the following: according to The China Daily, China and Russia have used a number of currencies in the past, but especially U S Dollars for “bilateral trades”. However according to a report in The China Daily in November 2010, “China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade”. The formal announcement was made by Premier Wen Jiabao and Russian Vladimir Putin.

In addition, Russia has also been reaching out to Europe. In Putin’s appearance in front of top German industrialists at a business forum in Berlin, he called for closer economic ties between Russia and the European Union. In his speech he outlined his vision for the future and his desire to create a Free European – Russian Trade Zone. However, the most critical part of his speech came when he showed what his true intentions may be towards the U.S. In his speech Putin said, that the “Euro is slightly fluctuating, but as a whole it’s a good , stable world currency that should take its rightful position as the world reserve currency. I think over the last 10 years there has been one wrong aspect that we should definitely eliminate. It’s the excessive monopoly of the dollar as the sole world reserve currency. This is certainly something negative.”

However, whether the dollar remains the world reserve currency is not the only concern at hand. As Senate Majority Leader Scott Jenkins said, a more immediate concern may be the efforts that are being made to decouple the dollar from oil. If that occurs, efforts such as the Utah Sound Money Act may well turn out to produce the solution that we need.

But there is some good news as well…

While news reports by their very nature tend to focus on the negative, there are public servants working hard to find a solution to the problems that we face. Utah Senate Majority Leader Scott Jenkins and State Representative Brad Galvez are working hard to find a solution to protect us, and our children, from the potential fall of the US dollar. As Senate Majority Leader Scott Jenkins said, “inflation is hurting the ability of families to purchase the items that they need. With the buying power of the dollar going down, if we do not act the purchasing power of the American family will continue to suffer. We must begin to study potential solutions and we must act.”

And make no mistake, we can no longer afford to sit on the sidelines and hope that someone else finds the answer. As a country we need elected officials who are willing to act and willing to do the research needed to find the best possible way to protect American families and that is why the Utah Sound Money Act and efforts like it are so very important.

As for the legislation itself, The Utah Sound Money Act will not only allow gold and silver coins issued by the Federal government to be used as “legal tender” in Utah, it will exempt them from capital gains taxes. Although the United States Constitution already allows states this freedom, the Utah Sound Money Act would codify this right in Utah law. The law would not mandate that the coins be used, but simply allows people the choice. The legislation also creates a panel to study how Utah families might use the alternative “legal tender” system for every day purchases such as food or medicine. Since the value of gold and silver constantly fluctuates, a system would have to be designed that would provide a practical way for Utah families to use the new system for daily purchases, which is why the panel is being formed.

As for Utah, there’s a reason Americans may want to start taking a look at how they operate and the recommendations made by their state’s leaders. Utah has been named, “the best managed state in the nation and has been repeatedly ranked as one of the best states to do business”. And it appears Forbes agree, for in their 2010 look at the Best States For Business, Utah was ranked number one when it comes to fostering growth! Check back for more information on exactly how Utah became the “best managed state in the nation” and what public servants such as Senate Majority Leader Scott Jenkins and State Representative Brad Galvez are doing that is making such a huge difference for their state!

Change is always hard, and sometimes scary, but Utah’s system does not seek to replace our current monetary system. However, what it does do is start the process of designing, and planning for a possibly implementation of a secure money system should the dollar fall. And while, as State Representative Galvaz said, we may not like the changes that have occurred in our economy, our job as parents, and their jobs as legislators, is to do our very best to give our children the best possible opportunities to succeed in the world in which we live. And while many of us, including myself, wish that we could return to a simpler time, the fact is, right now, we can’t. But what we can do, is work together to find the solutions that our children will need, no matter what crisis we face.

As shameful as it is, a Chinese student gets what we’re struggling to understand – government policies are stifling consumption, exports and therefor the economy.

A Bloomberg.compost mentioned that when a professor was discussing the nation’s move to keep interest rates low, a student chimed in with true wisdom:

Peking University professor Michael Pettis was discussing declining bank-deposit returns when a student interrupted with a story about her aunt that may stymie China’s plan to boost consumer spending.

“To send her son to university in six years it means she must replace each yuan in lost income with one from her wages,” the student said, according to Pettis.

Read it again, this example demonstrates one of the pressures that government-control of the economy (or in our case, Fed control) exerts. By keeping interest rates artificially low, investment income is hard to come by through anything but the most-volatile markets: Bond yields stink, CDs are worthless, and savings accounts generate no appreciable income. That means that savers now have less income to pay for normal expenses and that limits their ability to buy goods and services within the economy. Without investment income, your paycheck is all there is and that’s not enough.

China’s problem is very much similar to ours:

“Consumption is already at a dangerously low level,” said Pettis, author of the “The Volatility Machine,” a 2001 book that examines financial crises in emerging markets. “If it doesn’t begin to rise very quickly, China has a problem because household consumption will continue to drop as a share of GDP.”

Consumption represents as much as 70% of U.S. GDP. This lack of non-wage income, a large portion of income of retirees and near-retirees, means there is simply less to spend. This represents another downward push on the supply of money. If deposits in banks decline due to CDs and savings accounts being poor investments or not growing effectively, the banks have fewer assets to loan against. We are a fractional reserve system and only money loaned creates more money. As I discuss in this post on serious deflationary concerns, that’s the last thing we need.

As the post continues, it raises an interesting point that is of concern with Obama’s current direction. It’s been well-publicized that the President would like us to rely more on exports and less on consumer spending to power the U.S. economy.

The Group of 20 nations has urged China to boost domestic consumer spending to help offset reduced consumption from debt- strapped consumers in the U.S. and Europe. If Chinese shoppers fail to take over that mantle as the government’s 4 trillion yuan in stimulus wanes, then the nation may have to fall back on exports for growth. That would revive trade disputes with the U.S., which is battling 9.5 percent unemployment, said Huang.

Low interest rates are intended to create investment through credit and therefor grow the economy, but left too long and in a disinflationary economy, they create a just the environment required to foster deflation. As this article at AARP.com states:

On Thursday, James Bullard, the president of the Federal Reserve Bank of St. Louis, warned that the Fed’s current policies were putting the American economy at risk of becoming “enmeshed in a Japanese-style deflationary outcome within the next several years.”

So we’re keeping loose monetary policy because even the Fed has figured out that deflation is a real concern. What’s startling is that the Fed’s next action will pull even more investment income out of the market.

Mr. Bullard, in an conference call with reporters on Thursday, said he was not calling right away for the Fed to drop its position that interest rates would remain exceptionally low for “an extended period,” or to resume buying long-term Treasury securities to stimulate the economy.

When the Fed buys Treasury bonds, it means they are infusing cash into the economy by buying U.S. Treasury debt: monitizing the debt. This action will lower the rate on bonds (yields) which should make it less-expensive to borrow money. In economics, there are two sides to every position. If borrowing costs are low, lending incentive is minimized. The risk-reward ratio gets out-of-kilter. Why risk money for measly 3% return? If investor/saver mind-set is to stuff cash into a mattress, lowering interest rates won’t fix that and in-fact may make it worse.

A Chinese student uses a simple story to relate that the world may be heading into an unavoidable deflationary spiral. Throwing money at it (stimulus), artificially lowering borrowing costs (fed actions) and just pretending that the recovery is happening (Obama and Biden on T.V.) are not the solutions. It is quite possible that deflation is the solution to the bubbles that governments have caused over the last decade. If we don’t let them occur, they will anyway.. just worse. If that’s the case, are you prepared?

Much of the media has been declaring an end to the recession. I have been on the sidelines for months now and a few talking heads were not going to get me to throw my assets at a loser market.

I have done my best not to sound like Chicken Little, but there was absolutely no way I could in good conscience influence my readers into putting their assets into this bubble after the bubble. The government needs you leveraged, consuming and cash-strapped. This is not the time to be any of those. Despite the GDP rise, which is quickly-becoming a false indicator, we are not recovering. The government can’t even figure out why the GDP rose, but both of their explanations point to government liquidity in the market, not economic recovery. My recommendations? Put away some cash, get out of debt, invest, by cool stuff. In that order.

I am not hedged against gold, a short on the market or in any other way trying to influence you so that I can make a buck. I am conveying my current position. My positions in the market during this whole fiasco have allowed me to increase my retirement account by11%, make money on a few equities, and overall protect my family’s assets. Why? Because I did not believe the Bush crew, I do not believe the Obama team, and I never believe the media. I do my own research, look for true indicators, not just the cool meter that CNBC flashes or that Bernanke points at.

If I am wrong, I’ll admit it (my promise is that if Q4’09 and Q1’10 show growth over last year… I’ll write an article entitled, “I was wrong”), but so far… hasn’t happened. I am struggling to figure out if we will go inflationary or deflationary because our government can’t make a decision and is making some of the most dramatic and ill-advised moves in history. That is the same reason that business will cease to spend money. A wise investor will not put money into a market if they cannot understand the principles upon which the market it based. Our leadership wants to disassemble capitalism “brick-by-brick”, redistribute wealth, control the media, etc. These uncertainties prevent me from doing any real investing.

In September we see that consumer spending dropped off dramatically. Why? Because the government wasn’t buying cars and houses for people anymore. It proves that the economy isn’t recovering, only that the government was propping it up. Even the administration admits that the growth in GDP was due to cash-for-clunkers and the stimulus bill. That means that the American economy didn’t do anything. It also means that the government’s artificial propping-up of the auto and housing industries will just cause a secondary crash in both.

I do not intend to cry, “the sky is falling”, but if that’s what it takes to prevent you from losing your nest egg, house, or livelihood, then so-be-it. Call me Mr. Little if you must, but save, de-leverage, invest… then buy cool stuff.